Minnesota's fledgling online lottery operation has been thrown into jeopardy as the state Senate passed a measure Friday banning Internet lottery ticket sales.
The move came as legislators have blasted Minnesota Lottery director Ed Van Petten in recent days for embarking on online lottery ticket sales without legislative approval.
“I am not saying the lottery director overstepped his bounds,” said Senate President Sandra Pappas, DFL-St. Paul. “But it is a reasonable request to ask the lottery to slow down.”
The proposal was tacked into another gambling-related measure that passed 55-2, with strong bipartisan support.
Lottery officials insist they do have authority to branch off into online ticket sales.
“They are making a huge mistake,” Van Patten said Friday.
Van Petten said he presented legislators with data showing the benefits of online sales and that it does not hurt convenience stores that sell traditional lottery tickets.
“They didn’t even read it,” he said of legislators. “There are forces greater than me pushing this.”
Operators of the state’s 18 tribal casinos – who are significant contributors to both parties -- have watched the measure closely. They do not believe that lottery officials have authority to sell tickets online.
Nationally, the recession-racked casino industry has fought hard against new online gambling as casino owners look to prevent further erosion of their business.
It is not clear whether the House will take up the measure, but there is strong support among its members on both sides of the aisle.
DFL Gov. Mark Dayton, who appointed Van Petten, has urged caution.
“The governor wants to know whether these exclusions are benefiting the people of Minnesota, or the vested economic interests that make money off the status quo,” said Matt Swenson, a Dayton spokesman. “He has said we need to separate clearly what is in the public interest, and what is in the moneyed interest.”
Minnesota Lottery officials have been trying to find new ways to reach customers as sale of traditional paper tickets have languished.
Van Petten views the online sales a marketing tool to reach younger consumers who are more comfortable making purchases online. They say research shows online sales actually help retailers.
So far, about 8,500 Minnesotans actively buy lottery tickets online, a tiny fraction of the 1.2 million who regularly buy conventional tickets from retailers.
Lottery proceeds go to the state budget and to environmental and conservation causes.
State legislators will make up lost revenue by pulling money from the state budget.
“I think lottery officials are wrong and they shouldn’t do it,” said Senate Minority Leader David Hann, R-Eden Prairie. “If it requires legislation to make that clear, then we ought to pass it.”
Gov. Mark Dayton is blasting legislative Republicans for refusing to pay for additional construction projects that could bring new economic development to the state.
“They are just dead wrong,” Dayton said Tuesday. “The Republicans have been wrong on this since I arrived. They are short-changing projects all around the state that are job-creating projects.”
Democratic and Republican legislative leaders cut a deal last year to limit new construction spending to about $850 million this session. They made the agreement before a strong economic turnout left the state with a surplus of more than $1.2 billion.
Dayton says the strengthening economy and strong budget outlook give the state more cushion to increase statewide borrowing to pay for roughly $400 million in additional projects.
Since state borrowing requires a two-thirds vote, the measure gives Republicans a rare moment of leverage as Democrats control both the House and the Senate.
Republicans say that the state should not run up taxpayer debt, and leaders have publicly not budged from the $850 million target. They say that the agreed upon number fits with historical averages and see no reason to break from it now.
The statewide construction measure stands as one of the last major initiatives to get completed in the final weeks of the legislative session.
Dayton said a recent Star Tribune story about an unfinished water project in southwestern Minnesota “is a prime example of where the lack of a public investment has crippled that area for economic growth.”
The governor said he is willing to fully fund the water project if it would persuade some GOP legislators to support a higher borrowing measure.
“I don’t think they have a toenail to stand on to justify this rigid ideology,” Dayton said. Holding to that number “would deny a whole range of projects around the state because of their fiscal ideology.”
DFL Gov. Mark Dayton signed into law a dramatic increase in the state’s minimum wage Monday, giving raises to more than 325,000 Minnesotans.
The new $9.50 base hourly wage takes the state from having one of the lowest minimum wages to one of the highest when it fully kicks in by 2016.
“Minnesotans who work full-time should be able to earn enough money to lift their families out of poverty, and through hard work and additional training, achieve the middle-class American Dream,” said Dayton, surrounded by legislators, labor and labor leaders at a ceremonial bill signing in the State Capitol rotunda. “Raising the minimum wage to $9.50, and indexing it to inflation, will improve the lives of over 325,000 hard-working Minnesotans. I thank the Legislature for recognizing the need to make work pay in Minnesota.”
Minnesota’s dramatic wage increase puts the state at the forefront of a major initiative of President Obama, who has failed to persuade Congress to raise the federal minimum wage to $10.10 and instead focused on pressing his case state by state.
The state’s higher minimum wage has angered Republicans and business leaders, who say the higher wage will force them to lay off workers and become a drag on the fragile economic recovery.
“We believe that all Minnesotans deserve the dignity of supporting themselves and their families through hard work,” said state Rep. Ryan Winkler, a Golden Valley DFLer who was a chief negotiator of the minimum wage effort. “Raising the minimum wage and indexing it to inflation is an important step to create a rising floor for all wages that will benefit hundreds of thousands of Minnesotans who work hard and deserve to get ahead.”
At $6.15 per hour, Minnesota has one of the lowest minimum wages in the nation, lower than neighboring Wisconsin, Iowa, North Dakota and South Dakota. Minnesota is one of only four states with a minimum wage below the national rate of $7.25 per hour.
State officials estimate that the $9.50 base wage will put an additional $472 million in the pockets of Minnesota’s lowest-wage workers each year. Supporters say the increase in consumer spending is expected to help local businesses in communities across our state, and provide another boost to Minnesota’s growing economy.
“Today represents a big step forward for low-wage workers in our community,” said Sen. Jeff Hayden, a Minneapolis DFLer who was a chief supporter of the wage-hike measure. “We rely on these workers every day, yet many of them cannot support their own families. Raising the minimum wage is part of a larger effort to lift up the working poor and ensure all Minnesotans have the opportunity to earn enough to get by.”
A Minnesotan who earns $6.15 per hour work full-time earns an annual salary of just $12,792, about $7,000 below the poverty line. Raising the minimum wage to $9.50 per hour comes within $30 of closing that gap for the year.
To help small businesses, the bill also establishes lower minimum wage requirements for small employers and young workers once the new law takes effect Aug. 1.
Minnesota would spend an addition $209 million for education, prisons and raises for state-paid home health workers, under a proposal that passed through the state Senate on Tuesday.
“There are many things in here that are desirous,” said Senate Finance Committee Chairman Dick Cohen, DFL-St. Paul.
The 37-27 vote came after a prolonged floor debate in which Republicans repeatedly failed to amend the measure. Republicans have pushed for deeper tax cuts instead of more spending.
“Minnesotans have once again been denied additional tax relief," said Sen. Michelle Benson, R-Ham Lake. She called the measure "a disappointing display of misplaced priorities.”
DFL legislators who control both the House and Senate are trying to finish up the spending measures that they are paying for out of the state’s $1.2 billion projected budget surplus for he remainder of the budget cycle. Already, legislators have earmarked about $550 million for business and consumer tax relief and another $150 million for the state’s rainy-day fund.
The Senate proposal includes several provisions with strong bipartisan support, including 5 percent raises for home health workers, which will cost about $80 million.
“We support this,” said Senate Minority Leader David Hann, R-Eden Prairie. “This is something that was neglected in the budget last year.”
The proposal also includes a $2 million-a-year boost to state nursing homes to offset a measure to raise the state’s minimum wage to $9.50 an hour.
An unexpected increase in criminal convictions prompted Democratic legislators to set aside an additional $11 million to pay for the growth in the state prison population and the cost of renting beds from county jails.
The Minnesota Department of Corrections reported that incarcerations were up 8 percent over earlier estimates, which is an average of 513 extra offenders each year.
Law enforcement officials say the increased incarcerations come from a wide range of crimes, including a 23 percent jump in methamphetamine convictions, a 15 percent increase in DWI offenders, a 5 percent increase in criminal sexual conduct convictions. Corrections officials logged a decrease in prisoners for non-methamphetamine drug offenses.
The proposal adds millions in new spending on elementary education, including $8.8 million in early learning scholarships. The proposal sets aside money to bridge the disparity gap for minority students and for teacher evaluations.
Senators also included $3.5 million to ensure that all low-income students have a hot school lunch.
The measure also includes a one-time appropriation of $2.5 million to deal with financial challenges at the University of Minnesota Duluth.
The Senate measure differs from the House, so a special conference committee will try to resolve differences between the two. The measure increases spending by more than $741 million in the next budget cycle, ending in 2017.
On Tuesday the U.S. Supreme Court struck down federal limits on how much an individual can give to campaigns in aggregate, which could allow high dollar donors to spread their largess to a wider swath of political hopefuls and parties.
Unlike the federal system, which essentially limited how many donations in total a donor could give, Minnesota law does not place restrictions on the number of campaigns to which a high-dollar donor can contribute.
Current state law allows donors to give massive amounts to parties or PACs and allows donors to spread their donations to as many candidates or party committees as they wish.
"We’ve never limited the amount that an individual donor can give to a whole group of candidates," said Gary Goldsmith, executive director of the Minnesota campaign finance board. "We don’t limit at all the amount of money that an individual can give to a party."
Minnesota does place limits on how much candidates can accept from certain types of donors but Goldsmith said those restrictions were not considered by the court.
Other states, including Wisconsin, do have laws to limit the aggregate donations a contributor can spend in an election cycle, according to the National Institute of Money in State Politics. Those nine states' laws may be directly impacted by the federal decision.
The Supreme Court did not overturn the concept of limiting what a campaign can accept from a donor. Currently, donors are limited to giving $5,200 per candidate per election cycle to federal candidates. Minnesota law puts similar restrictions on what an individual can give to a single candidate.
The court's decision will have a much more far reaching impact on federal campaigns and parties, including those from Minnesota.
DFL chair Ken Martin said the ruling allows parties to tap donors for funds, even if those donors had already given to multiple other parties or candidates.
"It has a big impact on state parties," said Martin.
Currently, donors are limited to giving $123,200 for 2013 and 2014 in total to all federal campaigns. That limit made federal cash difficult to raise, Martin said. The Minnesota parties were not limited to what they could raise from individuals in their state committees.
After the decision, Minnesota parties will be able to raise more federal money -- up to $10,000 per individual -- from donors whether or not those individuals had already given to many other federal committees.
"That is hugely helpful to state parties," Martin said. He said the lifting of the overall cap will mean that parties can be more involved in helping federal candidates "up and down the ballot here in Minnesota."
Minnesota Republican Party chair Keith Downey said the decision may mean candidates and parties will be able to raise more.
"It will serve to direct campaign spending toward those who are closest to the public and most publicly accountable for their campaign activities. It also underscores the importance of both transparency and the protection of political speech, which are so important in our political process," Downey said.
Several donors with Minnesota ties have contributed enough in 2013 that they could have bumped up against the limit the court struck down.
According to a Star Tribune analysis of data from the Center for Responsive Politics, John Grundhofer, former chairman of U.S. Bancorps, donated $142,200 through the end of last year and Patricia Grundhofer, whose is listed on federal documents as the director of the John F. Grundhofer Charitable Foundation, donated $125,600. They gave primarily to non-Minnesota Republican committees.
Stanley Hubbard, head of Hubbard Broadcasting and a a frequent donor to state as well as federal causes, gave nearly $100,000 to federal committees last year alone. He said that every election cycle he gets many calls soliciting donations and he has to refuse them because he is maxed out.
Hubbard has a simple prediction for what will happen now that the court rejected the overall limits: "They are going to start calling."
Star Tribune data editor Glenn Howatt contributed to this report.
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